Increasingly in the UK we have seen state-led austerity, welfare retrenchment and deepening inequalities. This has led to increased precarity, experienced by people both in and out of work. This has been facilitated by the eclipse of a so-called embedded liberalism in the British economy and its replacement with a finance-led capitalism centred on neoliberalism (Crouch, 2011, Harvey 2007).
The recent financial crisis of 2008 reinforced the ascendant trajectory of finance-led capitalism and neoliberalism. The principles of de-regulation and privatization are now further embedded in the political economy of the UKs institutional framework. Economic re-structuring, informed by neoliberalism and by finance-led capitalism, is often described as a social revolution from above designed to restore the power of elite interests in the UK, by de-regulation and privatization (Cox and Nilsen, 2014:136). Indeed, over the past thirty years the privatization of utilities, housing, transport, health, education and infrastructure has been a key mechanism by which neoliberalism pumped profitability back into the private sector (Mason, 2015:278). Similarly, neoliberalism was diffused into the wider economy in the late 1970s and early 1980s by de-regulation which focused upon the liberalization of exchange rates and capital markets and later on in the de-regulation of financial markets. Defined as an accumulation regime which prioritizes investor-owner rentier interests (van der Zwan, 2014), financialization has since the late 1990s combined with a near complete de-regulation of the managerial prerogative, achieved in the main by legal restrictions on industrial action by labour. Both financialization and a heightened managerial prerogative combine to drive higher and wider claims made by employers and management on behalf of investor-owner-rentier capital.
This paper details how the financialization of employee pension contributions is part of the financialization process and more assertive managerial prerogative. Financialization of pensions results in both a falling income share for labour in terms of the national income, and also represents the opportunity for a sustained appropriation of previously earned labour income. The paper achieves this analysis by examining the process of value appropriation in 3 case studies: The Mineworkers Pension Scheme at British coal; the BHS pension scheme at British Home Stores; and the British Steel Pension Scheme at Tata Steel.
An examination of these case studies demonstrates that an appropriation of labour income can become a form of value creation to organisations (be they public or privately owned) which is ultimately sanctioned by the state through financial legislation. Moreover, for labour such legislation legitimises breaches of implicit contracts between capital and labour often dis-regarding them as part of the movement to finance-led capitalism. This further allows for greater value extraction by organizations, prioritization of shareholder value, and the ‘precarization of workers’ (Appay, 2010). As a result of this process individuals are increasingly exposed to the destructive processes of the global economy, whilst simultaneously being forced to assume greater responsibility for their own conditions and futures (Appay, 2010; Bryan et al, 2009).
Accordingly, this paper outlines the movement to finance-led capitalism as a social revolution from above, in which the state enables a rentier constraint on investment in firms and facilitates the mining of firm level assets such as pension schemes. The rentier constraint informs the UKs falling labour income share in national income and associated low level of productivity. In contrast to this, the financialization of pension schemes under Conservative and Labour Governments is a distributional initiative which helps restore profitability for rentier-investor capital in the face of low productivity in manufacturing and services. It follows from this that financialization may be more appropriately re-defined as the costs and consequences for labour of financial innovation across the economy.
Our focus is to re-connect work and political economy by embedding within the study of financialization the appropriation of pension contributions by employers and the state, which we argue has in turn manufactured a ‘pensions crisis’. This crisis enables employers to breach pension contracts with their employees (Thompson, 2003), and also institutionalises precarity (Appay 2010) – extending it to professional groups who previously enjoyed relatively stable and well-funded retirements. The associated re-structuring of pension schemes and payments, demonstrates how capital can appropriate and leverage accumulated pension funds with significant consequences for labour.
References.
Appay, B. (2010). ‘Precarization’ and Flexibility in the Labour Process: A Question of Legitimacy and a Major Challenge for Democracy’. Thornley, C., Jefferys, S. and Appay, B. (Eds) Globalization and Precarious Forms of Production and Employment, Cheltenham: Edward Elgar: 23-39.
Bryan D., Martin R., and Rafferty, M., (2009) ‘Financialization and Marx: Giving Labor and Capital a Financial Makeover’, Review of Radical Political Economics 41: 458
Cox, L. and Nilsen, A. (2014) We Make Our Own History – Marxism and Social Movement in the Twilight of Neo-Liberalism, London, Verso.
Crouch, C. (2011) The Strange Non-Death of Neo-Liberalism. London, Polity.
Harvey, D. (2007) A Brief History of Neo Liberalism, Oxford, Oxford University Press.
Mason, P. (2015) Post Capitalism – A Guide to our Future. London, Allen Lane.
van der Zwan, N. (2014) ‘State of the Art’ Making Sense of Financialization’ Socio-Economic Review, 12 pp. 99-129.
Thompson, P. (2003), “Disconnected capitalism: or why employers can’t keep their side of the bargain”, Work, Employment and Society, 17(2): 359-378.